It was hard to miss the widespread news coverage of the new crowdfunding provisions in the Jumpstart Our Business Startups Act of 2012, which is more commonly referred to as the JOBS Act. Title III of the act exempted certain crowdfundings from the registration requirements of the federal securities laws, and the U.S. Securities and Exchange Commission issued proposed regulations in October 2013 to implement the exemption. The proposed crowdfunding regulations received many comments, often related to the prohibitive cost of the proposed requirements, and the SEC still has not issued its final rules. Many states have filled the void by adopting their own crowdfunding exemptions, often citing job creation as the goal. However, neither the Pennsylvania legislature nor the Pennsylvania Securities Commission has joined this trend.
The states do not have the power to override the SEC, but there is a longstanding federal exemption from registration for intrastate offerings under Section 3(a)(11) of the Securities Act of 1933, as amended, and its safe harbor means of compliance, Rule 147. Many states have structured new crowdfunding exemptions to work along with the federal intrastate exemption. The state exemptions generally eliminate certain of the provisions of the proposed crowdfunding regulations that have drawn the most fire, including the requirements to use a broker-dealer or funding portal in an offering of any size, prepare audited financial statements for offerings of more than $500,000 and distribute periodic financial reports to investors after the offering.
